Farallon Capital starts new positions 3Q 2013 (Part 2 of 6)
Farallon Capital Management, LLC, is a global institutional asset management firm founded in 1986 by Thomas Steyer. It invests globally across asset classes, seeking superior risk-adjusted returns through bottom-up fundamental analysis that emphasizes capital preservation. While its investment philosophy remains consistent, its execution is flexible, allowing capital to shift among strategies, asset classes, and geographies based on prevailing opportunities. Farallon is headquartered in San Francisco and has offices in London, Singapore, Hong Kong, Tokyo, and São Paulo.
Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).
Farallon started new positions in Microsoft Corp. (MSFT), Comcast Corp. (CMCSA), Time Warner Cable (TWC), and Spreadtrum Communications (SPRD) and it sold positions in AutoZone Inc. (AZO) and Pfizer Inc. (PFE).
Why buy Comcast Corp. (CMCSA)?
Comcast has seen an increase in its share price recently on reports stating it’s one of the bidders for Time Warner Cable (TWC). There have also been unconfirmed reports claiming that Comcast is considering a joint bid for TWC with Charter Communications (CHTR), in which Liberty Media (LMCA) is the largest shareholder. The deal chatter has boosted the stocks of all players in the paid TV space. Analysts are expecting a consolidation in the industry due to increasing competition from telecom providers and high programming costs.
In its latest quarterly results, Comcast saw a revenue decline of 2.4% to $16.2 billion. Excluding the impact of the London Olympics, which generated $1.2 billion of revenue from Internet and TV advertising in the third quarter of 2012, consolidated revenue for the quarter increased 5.2%, to $16.2 billion. Earnings per share of $0.65 for the third quarter increased 41.3%, excluding gains reported in last year’s third quarter, related to Spectrum Co.’s sale of wireless spectrum licenses and NBC Universal’s sale of its interest in the A&E networks.
The company added 337,000 combined video, voice, and Internet customers—a 15% increase from last year, driven by growth in high-speed Internet and voice services and stable performance in video, partially offset by video customer losses of 129,000. Cable communications revenue increased 5.2%, to $10.5 billion, but cable advertising revenue decreased 10.8% during the third quarter, reflecting lower political revenue and one fewer week of advertising included in this quarter. In terms of commercial businesses, revenue increased 26.4%, to $836 million, for the quarter.
Revenue from the Cable Networks segment increased 4.0%, to $2.2 billion, compared to the third quarter of 2012. Revenue from the Broadcast Television segment increased 2.6%, excluding the impact of the London Olympics. Revenue from the Filmed Entertainment segment increased 3.3%, to $1.4 billion, compared to the third quarter of 2012, driven by higher theatrical revenue from the strong box office performance of Despicable Me 2. This was partially offset by a decrease in home entertainment revenue due to lower volume of new releases compared to last year. Theme Parks segment revenue increased 7.9%, to $661 million compared to $614 million in the third quarter of 2012, driven by higher per-capita spending at the Orlando and Hollywood theme parks and higher guest attendance at the Orlando park following the launch of the Transformers attraction. NBCUniversal saw solid results in each of its business segments, with healthy revenue growth.
The company has returned $3 billion of capital to shareholders, including share repurchases totaling $1.5 billion, and dividend payments also totaling $1.5 billion. The company faces competition from satellite operators DirecTV (DTV) and Dish (DISH), phone companies AT&T (T) and Verizon (VZ), and video streaming providers like Netflix (NFLX).
Farallon manages approximately $19 billion for institutions, including college endowments, charitable foundations, pension plans, and high–net worth individuals. According to its website, Farallon pursues multiple investment strategies on an opportunistic basis, which includes five core investment strategies: credit investments, value investments, merger arbitrage, real estate–related investments, and direct investments. Each investment is evaluated independently on a fundamental basis.
Farallon invests globally, focusing on both developed and emerging markets. It invests in public and private debt and equity securities and direct investments in private companies and real estate. It prioritizes preserving capital. While it values and employs risk management analytics, it primarily manages risk through rigorous research and analysis. It also seeks to build strong relationships with the management of the companies it invests in.
Farallon Capital Management founder Thomas Steyer attended Philips Exeter Academy and graduated from Yale University. He received his MBA from Stanford Business School, where he was an Arjay Miller Scholar. He announced in October 2012 that he would be stepping down from his position at Farallon in order to focus on political activism—in particular, advocating for alternative energy.
Browse this series on Market Realist:
- Part 1 - Farallon Capital starts new positions in MSFT, CMCSA, TWC, SPRD and sells AZO, PFE—13F Flash A
- Part 3 - Farallon Capital starts new positions in MSFT, CMCSA, TWC, SPRD and sells AZO, PFE—13F Flash C
- Part 4 - Farallon Capital starts new positions in MSFT, CMCSA, TWC, SPRD and sells AZO, PFE—13F Flash D